Understand how first party cover protects you and is well worth the cost!

Posted on: Feb 8, 2022 | | Written by:

Understand how first party cover protects you and is well worth the cost!

Published on February 8, 2022. EST READ TIME: 3 minutes

Most vehicle owners in India know that having third-party insurance is legally mandatory. That is because, if you get into an accident and you are at fault, you will need to compensate the victim. And that is where your third-party insurance can come in handy and prevent you from dipping into your savings. However, third-party insurance only protects the loss of other people. If you wish to stay protected against any damage that happens to you or your vehicle, due to an accident, fire, natural or manmade calamity, you need own damage cover or first party insurance. Read on to know more.

Who can buy first party insurance?

As the owner of the vehicle, you can buy the first party insurance in your name. The purpose of a first party insurance policy is to protect you from any financial hardship in case your vehicle gets damaged by any unforeseen event. It can include accident, natural or manmade disaster, theft, or fire. First party insurance is based on the concept of Insured Declared Value (IDV). IDV is the notional market value of your vehicle which the insurance company uses as the limit under which claims must be made.

What is covered in first party insurance?

The following are the key things that are covered in a first party insurance:

● Vehicle theft: Vehicle theft has always been a big problem in India. And without insurance, you end up with a massive loss in case your vehicle gets stolen. But with first party insurance, you are protected against vehicle theft. That is because the insurance company compensates you.

● Accidental damage repair: Accidents are very common in India because of the really large number of vehicles we have. The cost of accidental repairs can run into thousands or even lakhs of rupees. However, if you have first party insurance, this cost will be taken care of by the insurer.

● Natural calamity: Natural calamities like earthquake, flood, storms, cyclones and typhoons are always a risk as we live in a very geographically diverse country. However, first party insurance cover can protect you against repair costs arising out of damage caused by a natural calamity.

● Manmade calamity: The insurance policy will protect you if your vehicle is damaged by any act which can be qualified as a manmade calamity. This can include, but may not be limited to, riots, strikes etc.

What is not included in first party insurance

Though a first party insurance policy offers you ample coverage and is more robust than third-party insurance, there are a few things it cannot cover. These are:

● Illegal behaviour of any kind: If you are found driving in an inebriated state, without papers, or using a privately registered vehicle for any commercial purpose, the first party insurance cannot cover you.

● Depreciation of the vehicle: As your vehicle ages, it naturally tends to lose value in the market. This erosion of value is called depreciation. And if you file a claim, the insurer cannot compensate you for this depreciation value.

● Taxes paid to the government: When you purchase a vehicle, you pay a certain amount of money to the government for vehicle registration and road taxes. Such charges are not covered by the insurance company.

● Electrical or mechanical breakdown: When a vehicle is used regularly, it experiences wear and tear that may cause some of its parts to fail. Such parts need to be maintained and repaired lest the vehicle become non-functional. However, that cost is not covered by your insurance policy.

How can you improve first party cover?

You can improve your first party cover by buying different add-ons. Many add-ons can help you overcome certain exclusions that have been discussed above:

● Zero Depreciation Cover: This helps offset the depreciation exclusion from your policy.

● Return to Invoice Cover: This covers for the charges paid for vehicle registration and road tax etc. It is offered for new vehicles.

● Emergency Roadside Assistance Cover: This is meant to provide urgent support when you are stuck on the road.

All in all, keep in mind that just like third-party insurance protects you from legal liabilities in case of an accident, first party insurance protects you from unwanted financial liability in case of accident, fire, theft or natural or manmade calamities. Hence, both are important.

Disclaimer: The above information is for illustrative purpose only. For more details, please refer to policy wordings and prospectus before concluding the sales.

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